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Marimekko - Outlook brightens

Marimekko announced a guidance for 2020E and expects net sales to be lower compared to last year and adj. EBIT to be approx. at the same level or lower than last year. Due to the improved outlook we have increased our estimates. We upgrade to “BUY” (“HOLD”) with new TP of EUR 42.0 (32.0).

Guidance for 20E announced

Marimekko withdrew its earlier 20E guidance in March, solely due to the estimated impacts of the COVID-19. The company stated during its Q2 result that the coronavirus will have a significant negative impact on sales and profitability in 20E. Now the company has announced a guidance for 20E and expects net sales to be lower than in the previous year (EUR 125.4m) and adj. EBIT to be approx. at the same level or lower than in the previous year (EUR 17.1m).

Better than expected trend in sales

According to Marimekko, the improved outlook is mainly due to better than expected trend of Finnish retail sales during the summer and improved outlook of wholesale sales but also due to better fixed cost savings during the rest of 20E. The company however highlights that there are still significant uncertainties caused by the COVID-19. The travel restrictions remained tight throughout the summer thus it is likely that the money normally spent on traveling has now been put into other things. Additionally, during the pandemic, the trend of domesticity has increased among Finnish consumers which should also have a positive impact on domestic sales. According to the company, major portion of its net sales and earnings for H2E will be generated during Q3E.

Upgraded to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0)

We have increased our 20E sales expectation by ~2% and our 20E adj. EBIT estimate by ~21%. In our view, Marimekko’s mid-term outlook is good despite of the challenging times. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.6x and 16.4x which translates into a clear discount (~50%) compared to the luxury peers and at 20E-21E P/E multiple of 25.0x and 21.6x – also a clear discount compared to the luxury peers. We upgrade to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0).

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